President Trump cut off the cost-sharing subsidies. Now what?

About Joanne Kenen

Joanne Kenen, (@JoanneKenen) the health editor at Politico, has been AHCJ’s topic leader on health reform and curated related material at Follow her on Facebook.

In the next few days and weeks we’ll see the first wave of reactions from health plans – and unsubsidized Affordable Care Act exchange shoppers, because of premium increases – to President Trump’s decision to cut off immediately the cost-sharing subsidies to health plans participating in the exchanges.

Keep in mind that the health plans by law are bound to make these cost-sharing reduction (CSR) payments, bringing down the out-of-pocket costs of low-income consumers, whether the government pays or not. About $9 billion is at stake this year. (Reminder – these are the cost-sharing subsidies – NOT the separate tax credit that makes the health insurance itself more affordable for eligible individuals.)

Some plans already withdrew from ACA exchanges for 2018, citing the uncertainty about the CSR payments. That led to less choice and competition in many counties. Other plans remained in the exchanges but hiked premiums to compensate for the lost CSR revenue (overall, roughly 20 percent more). Those that didn’t do so are in a quandary. Depending on the rules of the states, they may yet pull out or attempt to renegotiate rates.

Remaining questions for you to track:

  • What will Congress do? They could appropriate the money and resolve the standoff over CSRS. They have a few pathways –and none are easy given the politics. They could fund them through the bipartisan ACA stabilization bill that Sen. Lamar Alexander, a Republican from Tennessee, and Sen. Patty Murray, a Democrat from Washington, are trying to negotiate. They could tuck them into the regular annual health appropriations bill later this year. Or they could get tacked on to other legislation. All are possible – but none are anything close to certain.
  • What will the health plans – and their state regulators do? (The immediate challenge is the 2018 season – there’s a pretty good chance that 2019 will be worse if Congress doesn’t act).
  • What will the courts do? Democratic state attorneys general have already sued. This is unlikely to be resolved quickly.

Here are two helpful resources to understand how the CSR decision will affect federal spending and the specific states. First, here’s a nonpartisan Congressional Budget Office analysis. (That assumed the payments stop after December, not right now, but it’s still useful). And here is a report from the Urban Institute. As for the conservatives, as Steve Bannon told the Value Voters Summit, they are hoping that this move will “blow up” Obamacare.

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